Better scared than sorry?

Howard Gold, writer for investment news site MarketWatch, said that investors who were off the investment radar for the past 6 years may have lost more than they think. This is because instead of concentrating on the technical and fundamental analysis of stocks themselves, most people dedicate a huge portion of their time to “stock oracles” that seem to take pleasure in becoming the naysayers of society. In a column by Gold’s colleague, Chuck Jaffe documeted:

“The fortune-tellers…know that the more outrageous the prediction, the more attention they get. They can highlight any forecasts they get right, knowing that their misfires are forgotten quickly. Thus, calamity and catastrophe sells. Right now, it’s a bull market for bearish forecasts.”

There’s a good reason why investors treat ominous forecasters like gods among men. Daniel Kahneman, a pioneer on behavioral economics and a Nobel Prize winner, couldn’t have explained it any better in his book “Thinking, Fast and Slow:”

“Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce.”

When people pit losses against their gains, they consider the losses more. This is the reason why many investors behave in a way that they’d rather miss on the opportunity of gaining $300,000 in gold ETF investments than lose $50,000 of their assets.

Apart from their “misfires” that society seems to easily forget, these oracles aren’t always what they seem to be. Doug Casey, a world-renowned investor and author of Crisis, discussed in one of his articles about manipulative stock seers. In it, he suggested that some “stock oracles” aren’t really seers but market manipulators who fool people into believing that they’re actually great at making predictions. In truth, the predictions they make are pre-determined, and can be adjusted depending on how investors react.

Gold laughed at Peter Schiff, CEO of Euro Pacific Capital Inc., when the latter called for a $5,000 per ounce on gold prices. Schiff is a prime example on why investors should always take what they hear on the Internet with a pinch of salt. Investment site BullionVault has a chart that shows just how absurd Shiff’s claim is. In the last 20 years, gold’s highest achieved mark was at $1,837.68. The truth is, gold’s prices only broke out of the $1,200 mark because of the turmoil in the Middle East and Ukraine. But if history taught us anything, it’s that political disorders that drive the precious yellow metal’s prices up are only temporary. Gold prices are foreseen to go down more because the U.S. currency is gaining more confidence from investors, the country’s employment rates are high, and the Fed’s quantitative easing has been reduced – factors that Schiff probably hasn’t taken into consideration when making his $5,000 per ounce prediction. (Read: HUGE MISFIRE)

Stock crashes and volatility aren’t determined by a supreme being. People create these disasters on their own. And those who know how to manipulate the market tend to reap the rewards from investors who aren’t as well-versed. Investors should believe in themselves more and try to decide based on the numbers they see and not with the words they hear.

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Indrajit Mukherjee

Indrajit is a professional blogger and Trading System developer, Amibroker expert, WordPress expert, SEO expert and Stock market analyst. He is studying the stock market since 1995 and is an active trader since 2000. He started the journey of StockManiacs.net on 2008. He follows Indian and world markets as well as the forex market closely.

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